Moving in the fast lane
The Fast Moving Consumer Goods (FMCG) industry today is getting a push from increased consumption and the support of the government. Career Central tells you more about the fast-paced industry and what skills are required to be a part of it.
By Melody Tan
Whether it is the toothpaste you use in the morning, the cereal you eat for breakfast, or the perfume or cologne you dabbed on your clothes before leaving for work, they all are part of the fast moving consumer goods (FMCG) industry that is growing in Asia.
What are FMCGs?
FMCGs refer to retail products which are “consumables” and have a short shelf life, either as a result of high consumer demand or because the product deteriorates rapidly. Examples of FMCGs would be toiletries, cosmetic products, and household products like detergents, as well as packaged foodstuff. This is as opposed to consumer products like kitchen appliances and cars, which would be considered as “durables”.
According to the AC Nielsen ShopperTrends 20051, Southeast Asia enjoyed the fastest growth in the FMCG sector in 2004.
These FMCGs come a long way before hitting store shelves. Firstly, research is carried out on chemicals and materials, and they are later developed into innovative products. This involves laboratory and science work, to for example, develop a new sort of shampoo or washing powder that is unique yet does not infringe on competitors’ patents.
These products are then manufactured in bulk and delivered to stores. Within this second stage, there are many other processes related to finance, information technology and logistics to produce the goods and actually get them to supermarkets and stores.
Yet, having space on the shelves does not guarantee the success of the product. The success of the product also hinges on commercial aspects, such as the sales and marketing of the product itself. This is the final stage before purchase and consumption.
Branding and marketing
Being a fast-moving industry with plenty of competition, marketing and brand management can be said to be the most crucial, as the product has to gain visibility and support among its target audience.
Being an industry of products which have high turnover rates and great variety, the creation, promotion and maintenance of a brand image is very important to attract consumers. The target audience has to be determined and the marketing campaign has to be aimed at addressing their needs or in some instances, creating a need in them. For example, a new skincare product, facial cleansing wipes, was introduced in Singapore in 2001 to target younger consumers who want a quick solution to cleansing their faces. They were marketed as quick and convenient, and packaged in a compact and thin packet, often with youthful or sophisticated design.
Since many products are similar in type, product differentiation is very important to make sure consumers pick your product over others. This differentiation is not only centred on the difference in the product itself, but also the difference in price and ‘status’. A luxury good, for example, needs to give the feeling of exclusivity, and thus cannot be priced too low or distributed in neighbourhood stores.
To maintain a competitive edge, the image of the retailers is also important. In 2003, retailers of beauty products such as SaSa and Watsons revamped their shopfronts into a minimalist, Zen style to project an image of sophistication. The new Watsons will also have independent beauty consultants who are not affiliated to any one brand on hand to provide advice to shoppers2.
Supply chain management
Good supply chain management (SCM) is extremely pertinent in the smooth running of the FMCG industry. SCM is the process of planning, implementing, and controlling the operations of the supply chain to satisfy customer requirements as efficiently as possible. A supply chain typically consists of manufacturers, service providers, distributors, and retail outlets. SCM also covers aspects of distribution and logistics as it spans all movement and storage of raw materials, inventories, and finished goods from the point of origin to the point of consumption. Given the high turnover rates of FMCGs, good supply management means that there would be sufficient stock available without creating too much surplus wastage, a suitable place to keep the inventories, and speedy transportation to cater to the demand for goods.
The Singapore government is thus determined to implement industry best practices and exploit infocommunications technology (ICT) to benefit the entire supply chain of manufacturers, suppliers and retailers. They announced in 2004 that they would be investing up to S$50 million over five years in the development of an integrated ICT platform to better service the trade and logistics sectors. This is to increase the productivity and competitiveness of the FMCG industry, as it will allow more efficient information flow among shippers, freight forwarders, carriers and financial institutions.
In 2003, the Infocomm Development Authority of Singapore (IDA), Singapore Article Number Council (SANC) and SPRING Singapore, came together to build a new $20 million electronic-Supply Chain Management Ecosystem for the FMCG industry. Today, a number of supermarket chains have adopted this electronic system for procurement. FairPrice supermarkets, for example, have reaped the benefits of an integrated and connected system. It currently has about 500 suppliers on its e-Procurement system and it does approximately S$400 million worth of business annually.
An improvement in supply chain standards can also ensure the freshness of perishable foodstuffs. The cold chain system that fresh pork goes through before landing up on supermarket shelves is an example. Last year, a new standard was imposed to ensure that the quality of chilled pork is maintained from the abattoir, through the various links of transportation and distribution, right up to the retail outlet and the end consumer. Use of this standard will also extend the shelf life of chilled pork, reducing wastage for suppliers.
All these initiatives serve to make Singapore a more trade and logistics-productive place, thus contributing to a more efficient FMCG industry.
The FMCG industry requires professionals from a whole variety of disciplines, from research to manufacturing, to finance and IT, to logistics and distribution, and to marketing. This opens up a lot of possibilities for employment.
Major and minor players in the industry have begun to hire at all levels in Singapore as well as other major Asian cities. With Asian markets showing signs of economic recovery, companies are looking to grow and expand their businesses3. In fact, Kelly News Services reports that hiring specialists say they received significantly more calls this year from Asia-based multinationals enquiring about promising candidates than in the past years.
That being said, much of the growth in the FMCG sector in Asia is due to the rising use and sale of FMCGs in developing countries like Indonesia and Philippines, both of which recorded double-digit FMCG sales growth in 20054. In Singapore, the pace of development is much slower since the presence of FMCGs has already been felt for many years.
However, Singapore is growing in strength in terms of the operations aspects of the FMCG business. This is shown by the increasing number of regional headquarters of big brands that are located in Singapore. Recently, LVMH Fragrance and Cosmetics, part of the French LVMH Group and the world’s largest luxury goods conglomerate, established its regional logistics hub in Singapore. The facility serves all Asia-Pacific markets as well as LVMH’s US and Canadian markets for promotional items. The biggest FMCG companies, such as Nestlé, Unilever and Procter & Gamble, also have operations in Singapore.
The current trend of lifestyle consciousness is also giving the FMCG industry a big push. As Singaporeans increase their need for convenience and good health, the impact of such lifestyle products on the FMCG industry will be stronger in the coming years.
Food and beverage products that support healthy diets, weight loss and on-the-go lifestyles were among the world’s fastest growing products. In Asia Pacific alone, soy-based drinks grew about 44% in 2004. Cosmetics and beauty products are also one of the growing industries that contribute to the growth of the FMCG sector. The fastest-growing personal care product in Asia Pacific was found to be face cleansing and moisturising products. The cosmetics and toiletries market in Singapore was worth almost S$629 million in 2002, and the projected growth of cosmetics and toiletries in Singapore is on average 4% for each year over the 2003 to 2008 period5. This can be nailed down to media emphasis of good and healthy skin regimes, as well as the emerging metrosexual market.
The road ahead
Since all of us have to purchase FMCG products in our daily lives, almost everyone is part of the target audience. People are caring more deeply about the products they put in their bodies or use every day. There is also a need for creativity and innovation in the FMCG business as new ideas for products, packaging, branding and advertising are required to keep the products in demand. There is a constant cycle of regular product improvements and updates as brands compete head to head on the shelf. The growth of this industry in other developing regions also signals the availability of job opportunities beyond our shores.
4According to the 2005 ACNielsen ShopperTrends.
5According to Cosmetics and Toiletries in Singapore reports 2003 and 2004 by Euromonitor International, provider of international market intelligence on industries, countries and consumers.